Intelisys Aviation Blog

Internal vs. External Loyalty Plans – Which is Best?

Loyalty plans have the capability to generate thousands of dollars in extra revenue that would never have been realized without such a marketing strategy. The power of customer loyalty is well-proven. When a brand gains customer loyalty it enjoys not only the benefit of automatically returning customers, but the luxury of not having to spend even more money to convert new customers.

Airlines have been on board with loyalty plans for decades now, as soon as the myriad of benefits hit their radar screen. Airlines have teamed up with credit card companies and even store loyalty programs to gain—and keep—loyal customers.

Problems with Airline Loyalty Plans

Increasingly however, there have been grumblings from sections of the public who are avid users of these loyalty plans, that some of them are too complicated and clunky to use. Some of the complaints include not being able to book seats on flights they really want, being excluded from flying on certain days, and being bumped off of flights due to their lower “status” because they bought seats with miles instead of cash.

Airline execs, for their part, sometimes put the blame on the third party purveyors of loyalty plans, claiming a lack of control or even lack of responsibility for the complaints. This kind of thinking doesn’t serve the customers or the airlines well.

Benefit of Internal Loyalty Plans

Internal loyalty plans could provide the answer to better customer satisfaction and fewer criticisms for the airlines to handle. With and internal loyalty plan, airlines have complete control over what benefits are available, how they are earned, and most importantly, how they are redeemed.

Control over redemption policies takes precedence over other aspects of implementing the loyalty plan, because that is what most of the customer complaints are related to. Few loyalty plan subscribers quibble about how many points they’re able to rack up based on purchases. Most simply take that caveat as fact that cannot be altered. The aspect of what benefits are available in the first place is often what lures a subscriber to begin with. An airline loyalty program that offers 100% free flights after enough points are earned will do better than a loyalty program where the top benefit is just a BOGO offer.

Benefit of External Loyalty Plans

Loyalty plans are expensive to maintain. Essentially, an airline, depending on the plan, may need a completely separate department to implement and properly manage a successful loyalty plan. That’s where external loyalty plans shine.

With an external loyalty plan, airlines are free from the bounds of exorbitant administrative costs associated with maintaining the loyalty plan, which ultimately helps the airline be more profitable. In turn, a more profitable airline could theoretically provide better benefits that are easier to redeem.

Weighing the pros and cons of an internal versus external airline loyalty plan is a lofty thought process that requires input from customers as well as the airline executives themselves.